An extended and integrated model planned at the beginning of the 2000s, able to balancing different public interests, adapting to the evolution of consumption and technologies and generating positive economic and social value. The Italian regulated market is built on extensive retail electronic control networks that record each wager and its outcomes. Remote gambling, nominative, is also fully registered by public control systems and provides for a national self-exclusion register. ▪ Regulators together with the Industry need to bet on medium-long term projects and more concrete positions of social responsibility based on ✓ empowerment of social \ self-controlled players (complete, active information about gambling as entertainment and not as income generation) ✓ identification and exclusion of pathological players (enhancing filtering systems by exploiting the extensive communication networks already active in Italian retail), guiding them to professional assistance and reduce underage gambling ▪ It is urgent to rethink the regulated market strategy maintaining customer satisfaction to beat again the black market ▪ However, enhancing control and data-driven solutions through full on the-edge technologies historically characterizing the Italian system would boost the deployment on new strategies.

1. EMMANUELE M. CANGIANELLI
PARTNER, MAG
moneyteinment@gmail.com
12th European
Conference on
Gambling Studies
and Policy Issues
12 SEPTEMBER 2018
Freedom of Choice
or Limited
Opportunities
ITALIAN REGULATED
MARKET : STATE OF
THE ART

2. RATIONALS OF THE ITALIAN REGULATED MARKET
CONTRAST TO THE
ILLEGAL MARKET
•Competitiveness of the
regulated offer against black
and grey one
•Many and focused controls on
the gambling offer
PROTECTION OF
REGULATED
MARKET
•Profitability of the
regulated supply chain
•Regulated competition
among products and
operators
•Generation of public
revenues (tax and duties
for gambling-related public
services)
CONSUMER
PROTECTION
•Information,
awareness, security
and fraud-proofing
activities
•Assistance and care
about problematic
and pathological
addictions
•Effectiveness of the
prohibition of
minor's gambling
An extended and
integrated model,
planned at the beginning
of the 2000s, able in
balancing different public
interests, adapting to the
evolution of consumption
and technologies and
generating positive
economic and social
value.
The Italian regulated
market is built on
extensive retail electronic
control networks that
record each wager and its
outcomes.
Remote gambling,
nominative, is also fully
registered by public
control systems and
provides for a national
self-exclusion register.
September, 2018

3. HISTORICAL REVENUES TREND
ADM and operators data. 4 historical casino not included
0
5.000
10.000
15.000
20.000
25.000
Gambling Revenues
(player's losses)
Public revenues
Operators revenues
Public revenues have always
been higher than the
operator’s. In 2017, 55,3% of
gambling revenues.
19.1 bln
10.6 bln
8.5 bln
GGR Mln € September, 2018
Several regulations of existing products
on the black market: sports betting,
AWPs, online casinos, betting exchanges
extended the regulated market by
eroding the illegal "market shares".

4. REVENUES TREND (RETAIL+REMOTE)
17.7 bln
1.3 bln
0
5.000
10.000
15.000
20.000
25.000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Remote Gambling
Retail Gambling
Thanks to continuous fighting against black
and grey markets, the regulated market
revenues grew of 42% from 2007 to 2017
(retail 35%, remote 474%).
GGR Mln € September, 2018
ADM and operators data. 4 historical casino not included
7,2%
92,8%

5. REVENUES TREND (RETAIL PRODUCTS)
3.3 bln
2.4 bln
1.1 bln
0.4 bln
10.3 bln
0
2.000
4.000
6.000
8.000
10.000
12.000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Lotteries Scratch&Win Betting Bingo Gaming Machines
Estimation on ADM and operators dataGGR Mln €
Gaming machines established as
the ever-growing retail product,
attracting 54% of total players'
spending in 2017.
September, 2018

6. REVENUES TREND (REMOTE PRODUCTS)
32
5
583
28
153
569
-100
0
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Lotteries Scratch&Win Betting Bingo Poker&Skill Casino games
Estimation on ADM and operators dataGGR Mln €
After an initial interest in online poker, the
launch of online slots in 2012 pushed
casino games - together as betting offers -
as major remote gambling products.
Remote is
7,2% of
total players
expenditure
in 2017
September, 2018

7. -20.000
-
20.000
40.000
60.000
80.000
100.000
-2.000 0 2.000 4.000 6.000 8.000 10.000 12.000 14.000
THE PLAYERS (2017)
Analysis and estimation on GFK, Nomisma, CNR and MIP research. Residents in Italy age 15-74
Sphere:
Players
2017
Slots Casino: 3 mln
Lotteries: 8,6 mln
Betting: 4,5 mln
Bingo: 1,1 mln
PoS (unit)
Total unique
customers
2017: 18,8
mln
Scratch&Win: 16 mln
Estimate of gamblers in
Italy is close to 20 million
people; the highest
concentration is in S&W and
lotteries (3/4 of the
players) with some millions
of players for betting and
slots (AWP and VLT).
Online players (registered)
are around 1.8 million.
The retail network exceeds
80,000 points of sale, of
which about 5,000
specialised shopshalls.
Remote players
0,4
mln
0,1
mln
1,2
mln
0,1
mln
1,8
mln
*
* Casino Games
GGR
mln €
September, 2018

8. BLACK AND GREY MARKET
Slot and
casino
games
75%
Betting
15%
Remote
gambling
7%
Scratch&
Win
2%
Lotteries
1%
Bingo
0%
Even with the difficulty of
measuring the unobserved
and the illegal economy,
institutional and research
activities in more than
twenty years indicate that,
despite a large black and
grey market continuous
exposure, unregulated
economic dimensions remain
estimable in around 3 - 4 bln
€ of players expenditure
(over 10 billion € in wagers).
Unregulated activities are
largely concentrated in slots
and casino games (with
rigged machines or web
totems) and offshore betting.
Estimation on Italian Parliament, Financial Police, ADM, LUISS, OECD data.
Destination of players' spending
outside the regulated market
September, 2018

9. ADDICTIONS AND UNDERAGE GAMBLING (AGE 15-64)
In age classes 15-64, high-
risk approach to gambling
is estimable in around 1%
of the Italian residents,
extended in less than 3,5%
considering also the
moderate risk (approx. 1,3
mln people)
Responsible players are
estimable in approx. 13,5
mln in the same age
classes.
Underage gambling is
estimable in near 0,6 mln
of young people.
Over 65-aged players are
2,1 mln (49% of the age
class).
48,9%
35,8%
9,8%
4,1%
1,5%
65,7%
30,4%
2,7%
0,6% 0,5%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
No
players
No risk Low risk Moderate
risk
High risk
M F
Analysis and estimation on CNR [IPSAD®2017-2018; ESPAD®Italia 2017] data.
Prevalence based on CPGI screening (Ferris, Wynne, 2001; Colasante et al., 2013)
(age 15-64)
September, 2018

10. EVOLUTION OF THE GAMBLING POLICIES APPROACH
1. CONTRAST TO
THE ILLEGAL
MARKET
2. PROTECTION
OF REGULATED
MARKET
3. CONSUMER
PROTECTION
1. CONSUMER
PROTECTION
2. CONTRAST TO
THE ILLEGAL
MARKET
3. PROTECTION OF
REGULATED
MARKET
PUBLIC POLICIES 1998-2012 PUBLIC POLICIES FROM 2012
September, 2018

11. ITALIAN REGULATED GAMBLING: GETTING STUCK
PROS CONS
Strong dependence of the
State budget from
gambling revenues
Unresolved role of
regional and local councils
Significant, even if not
epidemic, addiction
problems in gamblers
population
High level of technologies
and data management into
the controlling systems
Competitive regulated
market based on
concession system
(operators provide gambling
and control services through
public procurement contracts)
Extended public control of
the gambling market
(most of the gambling
offer is regulated)
September, 2018
Since 2014 several new
regulatory projects have been
drafted, but lack of
concreteness, fear to lose
revenues and some risks of
unjustified competitive
imbalance blocked the redesign
of the gambling industry.
During next months
Government is called once
again to propose a new,
better-balanced market model

12. ITALIAN REGULATED GAMBLING: GETTING STUCK
▪ Regulators together with the Industry need to bet on medium-long term
projects and more concrete positions of social responsibility based on
✓ empowerment of social self-controlled players (complete, active
information about gambling as entertainment and not as income
generation)
✓ identification and exclusion of pathological players (enhancing
filtering systems by exploiting the extensive communication networks
already active in Italian retail), guiding them to professional
assistance and reduce underage gambling
▪ It is urgent to rethink the regulated market strategy maintaining
customer satisfaction to beat again the black market
▪ However, enhancing control and data-driven solutions through full on-
the-edge technologies historically characterizing the Italian system
would boost the deployment on new strategies.
September, 2018

13. RETHINK HOW TO MANAGE THE REGULATED
GAMBLING OFFER IN ITALY
SOLUTION STATUS
CONTRIBUTION TO STRATEGIC OBJECTIVES
EMPOWER
RESPONSIBLE
GAMBLERS
IDENTIFICATION
AND EXCLUSION
OF PATHOLOGICAL
GAMBLERS
REDUCE
UNDERAGE
GAMBLING
Increased EGM taxation DONE, further growth planned • • •
Tax on winnings > € 500 DONE • • •
Reduction of AWPs (from free
authorization to 265k + 55k VLT)
DONE • • •
Distance limits from several
places (churches, schools, …)*
IN PROGRESS, different
regional timelines • • •
Commercial hours limitation
in retail*
IN PROGRESS, different
regional timelines • • •
Ban of gambling advertising IN PROGRESS • • •
EGMs activation only with
National Health Card
TO BE IMPLEMENTED
by January 2020 • • •
Reduction and specialization
of retail venues PLANNED • • •
Pre-commitment through
exclusion (self or legal) in all
products by a national register
DISCUSSED
• • •
September, 2018
* Autonomous measures of local authorities, not aligned in State legislation POSITIVE NEUTRAL NEGATIVE

14. The increase in taxation, reducing payouts, generated an increase in players' spending fully allocated to
tax revenues. The "price" of playing time has increased, but the players didn't change their approach.
0
500
1.000
1.500
2.000
2.500
3.000
0
100
200
300
400
500
600
700
Turnover
Winnings
Gross Revenues (Players expenditure)
Tax
Net Operators Revenues
A NEGATIVE CASE HISTORY: AWP TAXATION
September, 2018
Estimation on ADM and operators data. Mln € September, 2018
12,1%
12,2%
11,8%
12,7%
12,7%
13,0%
17,5%
18,5%
75,2%
75,7% 75,7%
75,6%
75,0%
74,4%
71,6%
70,2%
67,0%
68,0%
69,0%
70,0%
71,0%
72,0%
73,0%
74,0%
75,0%
76,0%
77,0%
10,0%
11,0%
12,0%
13,0%
14,0%
15,0%
16,0%
17,0%
18,0%
19,0%
Average year taxation
Average Payout Ratio
Average
month data

15. ITALIAN REGULATED GAMBLING: A NEW APPROACH
September, 2018
A new, integrated strategy for the
Italian regulated market
EGM heavy
taxation, Low
payout, rate,
Advertising
ban, Local
distance and
commercial
hours limits
Tax on
winnings, EGM
cap, EGMs card
Reduction and
specialization
of venues, Pre-
commitment
trough
exclusion
The next regulatory session should be used to
resolve regulatory ambiguities:
✓ overcoming counterproductive tools for the
prevention of the addictions (such as
distances or commercial hours limits, or
AWPs too high taxation with low payout)
✓ using the existing powerful technological
resources for an effective pre-commitment
system based on exclusion
✓ generating economic resources fueled
mostly by conscious and responsible
gambling
POSITIVE NEUTRAL NEGATIVE

16. EMMANUELE M. CANGIANELLI
PARTNER, MAG
moneyteinment@gmail.com